australia livestock and products annual september 2016 · 9/7/2016 · 12 r-2012 -2012 2012 13...
TRANSCRIPT
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THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA
STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY
Date:
GAIN Report Number:
Approved By:
Prepared By:
Report Highlights:
The Australian beef cattle herd is expected to begin rebuilding in 2017, following record years of
slaughter in response to high overseas prices and poor pasture conditions. This turnaround reflects
the sharp break in drought conditions from mid-2016, especially in Queensland and NSW. The beef
cattle herd size dropped to an estimated 26 million in 2016 but is expected by Post to gradually
recover from late 2017 as cow and calf slaughter declines. Beef and veal production is estimated
by Post to have declined to 2.2 million MT over 2016 and to reach 2.0 million MT in 2017.
Australian exports of beef and veal are therefore forecast to decline to 1.4 million MT despite
continued strong international demand. Pork production is stable and focused on fresh pork
products while imports supply most of the market for processed pork products.
Roger Farrell, Agricultural Specialist
Roger Farrell, Agricultural Specialist
September 2016
Livestock and Products Annual
Australia
AS1615
9/7/2016
Required Report - public distribution
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EXECUTIVE SUMMARY:
Due to a severe drought from 2011, poor pastures and rising international prices, the size of the
Australian beef cattle herd fell to a 20-year low of 26 million in 2016. Seasonal conditions turned
around sharply in mid-2016 with above average rainfall which is expected to continue for the rest
of the year. As a result, pastures are recovering across the country and slaughter rates are
forecast to decline to more levels in 2017 and beyond. Continuing strong international demand for
beef and live cattle has pushed livestock prices to new highs and slowed the rate of restocking due
to competition for breeding stock. High domestic prices for beef in recent years has increased
consumption of pork and chicken, reinforcing a long-term trend.
Australian beef and veal production is forecast to decline significantly to two million MT in 2017
due to supply constraints and the beginning of the herd rebuild as farmers retain breeding stock.
The retention of cattle in feedlots due to low grain prices and a shortage of feeder cattle means
that higher average carcass weights will offset lower slaughter numbers. Beef cattle processors are
rationalizing their operations in response to lower supplies. Beef and veal exports are forecast due
to lower production with international demand still strong. Australia is expected to remain the
major beef exporter to the US market, but volumes will fall.
High beef prices have provided support for the domestic pork industry, especially for fresh meat
which cannot be directly imported but must be processed locally. Swine numbers are relatively
stable although the number of sows has been slightly revised upwards. Imports supply most of the
market for processed pork products. Post has sought to expand market access, with U.S.
microwave bacon exports approved in 2016. Negotiations have continued over biosecurity controls
which currently prevent imports of fresh pork from the United States and other countries.
Commodities:
Meat, Swine
Meat, Beef and Veal
Animal Numbers, Swine
Animal Numbers, Cattle
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SEASONAL OUTLOOK
In Australia, cattle are predominantly grass-fed and the availability of pasture is critical to carrying
capacity. Over the three years to mid-2016, drought conditions affected around one third of beef
cattle farms across Australia. This contributed to high cattle turn-off (slaughter and live cattle
exports) as farmers faced feed shortages while export markets offered high prices. Over this
period, the number of grain-fed cattle in feedlots increased due to adverse seasonal conditions and
the need to finish cattle before market.
Adverse seasonal conditions appear to have ended in mid-2016 due to heavy and continued
rainfall. Since June 2016, few regions have received below average rainfall and many received
record falls and lower average temperatures. The seasonal outlook for August to October is for
higher than average rainfall, especially in Queensland and NSW, which are the States most affected
by the previous drought (see Chart 1). Current climate conditions in Australia are being influenced
by a strong negative Indian Ocean Dipole, continued cooling of tropical Pacific Ocean waters, and
very warm sea surface temperatures surrounding northern and eastern Australia: see
www.bom.gov.au. Temperature across eastern Australia will be much more benign than in recent
years (Chart 2). Extensive rainfall in most regions has removed virtually all short-term rainfall
deficiencies and significantly improved soil moisture conditions for the pasture and feed grain
industries. Improved pasture growth and rainfall in Queensland and NSW is shown in Charts 3 and
4 below. Improved seasonal conditions and grass cover in most beef producing regions will support
lower slaughter rates and encourage gradual herd rebuilding.
Chart 1: Rainfall forecast for the three months to October 2016
Source: Australian Bureau of Meteorology
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Chart 2: Temperature outlook for the three months to October
Source: Australian Bureau of Meteorology
Charts 3-4: Pasture growth in Queensland and NSW to July 2016
Source: Queensland and NSW State Governments (Long Paddock website).
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CATTLE
Cattle Numbers
In 2016, the size of the Australian beef cattle herd fell to a two decade low of 26 million head. The
decline in the national herd is expected by Post to be stopped because of lower cow and calf
slaughter numbers and the considerable improvement in seasonal conditions and pasture. The
turnaround in the female slaughter is a clear indicator of the intention of producers to restock but
high livestock prices has inhibited this intention despite improving pasture conditions and low grain
prices.
Increasing cattle and beef prices and a feed shortage in northern Australia contributed to the high
slaughter rate over the three years to 2015. Mixed beef and grain farms in Queensland and
northern NSW were especially affected by the drought and accounted for over 40 percent of total
cattle turn-off in northern Australia. More recently, this region has benefited especially from
improved rainfall and significant pasture growth, providing an opportunity for stock retention. High
stock prices still provide an incentive to some producers for turn-off, but also encourage others to
retain livestock for weight gain and breeding purposes. A continuing improvement in seasonal
conditions is needed for herd rebuilding to gain momentum.
Currently, cattle supplies to processing facilities have tightened due to the smaller national herd
and the trend towards stock retention. Competition between beef processors and live exporters for
stock has increased significantly. In August 2016, the Eastern Young Cattle Indicator (EYCI)
reached a new record of over A$7.006 cents per kilogram reflecting competition for livestock,
especially by re-stockers.
Cattle Slaughter
In 2016, Australian cattle slaughter is expected to decline from historic highs in previous years to
be 8.15 million head, around the same as the official forecast (Chart 5). Slaughter is forecast to
decline to 7.4 million in 2017 due to improving seasonal conditions and a greater preference for
stock retention in pursuit of herd rebuilding. Post estimates that cow slaughter in 2016 will slow to
3.55 million head (44 percent of total slaughter) as female stock is increasingly retained. This is a
revision to the official forecast of 3.9 million because of the sudden turnaround in seasonal
conditions and the rapidly falling female slaughter rate, which is forecast to continue. In 2017, Post
has forecast female slaughter to fall to 3.4 million as stock is retained for herd rebuilding.
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Chart 5: Cow and heifer slaughter by major State (RHS) and for Australia (LHS), 2014-16
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Cows slaughtered Australia Queensland NSW
Source: Australian Bureau of Statistics (2016).
For the same reasons, calf slaughter is expected to decline to 0.55 million, down from the official
estimate of 0.6 million. Post has forecast calf slaughter to decline further in 2017 to 0.5 million as
producers retain stock to take advantage of much better pasture conditions. Other slaughter
(mostly steers) is expected become more significant at 4.05 million head, matching the official
estimate. Post has forecast other slaughter to decline to 3.5 million in 2017 due to declining
supplies of cattle which will further support higher livestock prices in Australia (Chart 6).
Beef and Veal Production
Beef and veal production is estimated by Post at 2.2 million MT in 2016, around the same as the
official estimate. This decline reflects the continued fall in slaughter numbers and diminished size of
the national herd. An increase in average carcass weights is expected because of the improvement
in pasture conditions, low grain prices and a decline in female cattle being processed. Post forecast
that beef and veal production in 2017 will decline further to 1.4 million MT as a result of the
continuation of these trends.
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Chart 6: Eastern Cattle Indicator, 2014-August 2016 (Australian cents/kilogram cwt)
Note: The Eastern Young Cattle Indicator (EYCI) is the general benchmark of Australian cattle
prices. The indicator is a seven-day rolling average produced daily by MLA's National Livestock
Reporting Service (NLRS). The EYCI includes vealer and yearling heifers and steers, grade score C2
or C3, 200kg+ liveweight from saleyards in NSW, QLD and VIC. The results include cattle
purchased for slaughter, restocking or lotfeeding and are expressed in cents per kilogram carcass
(dressed) weight (c/kg cwt).
Source: Meat and Livestock Australia (2016).
Consumption
In 2016, beef consumption is expected to fall slightly due to supply shortages and higher retail
prices in Australia. Retail beef prices rose by an estimated ten percent during 2015 due to higher
global beef prices, leading to a significant fall in domestic beef consumption. In 2016, higher red
meat prices mean that domestic per capita consumption of alternative meats such as chicken and
pork is likely to increase further, continuing a long-term trend. The ratio of retail beef prices to
chicken in mid-2016 was the highest on record since 1970 (see Chart 7 below).
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Chart 7: Comparative production and retail prices for beef and chicken in Australia
Trade
In 2016, Post estimates that beef exports will fall to 1.5 million MT, in line with official forecast. In
2017, beef exports are forecast to decline further to 1.4 million MT due to a shortage of supplies
and herd re-building rather than lower international demand. In recent years, Australian exports
have been focused on markets in the United States, Japan and Korea, but exports to China could
increase in the future. Exports by country are shown in Table 1.
The US Beef Market
Australia is the largest supplier of imported beef into the United States, which is the major beef
export market for Australian producers. Around 70 percent of Australian beef exports to the US
market are manufacturing beef, which is used in ground beef products or for further processing. In
2016 and beyond, US demand for Australian beef exports are expected to decline as domestic
production increases, while supply constraints also inhibit exports from Australia.
The Japanese Beef Market
Australia is a major supplier to the Japanese beef market; with over a 50 percent share in 2016
although this is declining. Japan accounted for one fifth of Australian beef exports in 2015 and was
its major market for grain-fed beef. In 2016, Post expects Australian exporters to face more
competition from US exporters although tariffs on exports of fresh beef from Australia to Japan
have fallen from 38.5 percent to 30.5 percent under the bilateral FTA.
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The Korean Beef Market
Australia’s beef exports to Korea grew by 30 percent in 2015 but Australian exporters face greater
competition from U.S. beef exporters which retain a five percentage point advantage over
Australian exporters into the Korean beef market due to the earlier implementation of the US-
Korea FTA.
The Chinese Beef Market
Post expects Australian beef and veal exports to China to increase by around ten percent in 2016
as market access is expanded under the bilateral FTA. Australia’s beef exports into the Chinese
market have focused on supplying high-value restaurants and the food services industry.
Exports of Live Cattle
In 2016, Australian live cattle exports are expected to be stable at 1.1 million head despite ongoing
supply constraints because of the smaller Australian cattle herd. In recent years, live cattle exports
have become more significant and accounted for 12 percent of total turn-off in 2015. Indonesia has
always been the major market for live cattle exporters because of its proximity and its preference
for lower weight feeder cattle which can be finished in that country. Exports of live cattle by
country are given in table 2 below.
Chart 6: Australian live cattle exports, year to June, 2012-16 (‘000 head)
Source: World Trade Atlas (2016).
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Table 1: Australian beef exports by country, 2009-2015 (‘000 MT)
2009 2010 2011 2012 2013 2014 2015
United States 253 186 170 227 212 396 420
Japan 366 366 352 313 294 289 283
South Korea 129 141 162 142 155 157 182
China 7 10 14 35 153 128 152
Indonesia 53 50 43 27 40 58 40
Other 167 224 266 261 284 294 249
World 975 977 1,007 1,005 1,138 1,322 1,326 Source: World Trade Atlas.
Table 2: Australian live cattle exports by country, 2009-2015 (‘000)
2009 2010 2011 2012 2013 2014 2015
Indonesia 773 521 414 279 452 728 619
Vietnam 0 1 1 3 67 185 313
China 33 57 54 56 67 118 82
Israel 37 43 54 50 98 78 79
Malaysia 14 17 12 33 48 53 55
Russia 2 13 31 39 35 48 42
Other 95 223 129 160 84 87 146
World 954 875 695 620 851 1,297 1,336 Source: World Trade Atlas
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Production, Supply and Distribution Statistics:
Animal
Numbers, Cattle
2015 2016 2017
Market Begin
Year Jan 2015 Jan 2016 Jan 2017
Australia USDA
Official New Post
USDA Official
New Post
USDA Official
New Post
Total Cattle Beg. Stks
29102 29102 27682 27682 0 27582
Dairy Cows Beg. Stocks
1710 1710 1710 1710 0 1710
Beef Cows Beg.
Stocks
13200 13200 13100 1310 0 13100
Production (Calf Crop)
9664 9664 9200 9200 0 9200
Total Imports 0 0 0 0 0 0
Total Supply 38766 38766 36882 36882 0 36782
Total Exports 1336 1336 1100 1100 0 1100
Cow Slaughter 4450 4450 3450 3550 0 3400
Calf Slaughter 667 667 625 550 0 500
Other Slaughter 4558 4558 4050 4050 0 3500
Total Slaughter 9675 9675 8125 8150 0 7400
Loss 73 73 50 50 0 50
Ending Inventories 27682 27682 27607 27582 0 28232
Total Distribution 38766 38766 36882 36882 0 36782
(1000 HEAD)
Meat, Beef and
Veal 2015 2016 2017
Market Begin Year
Jan 2015 Jan 2016 Jan 2017
Australia USDA
Official New Post
USDA Official
New Post
USDA Official
New Post
Slaughter
(Reference)
9696 9675 8125 8150 0 7400
Beginning Stocks 55 55 26 26 0 32
Production 2547 2547 2180 2200 0 2000
Total Imports 13 13 16 16 0 16
Total Supply 2615 2615 2222 2242 0 2048
Total Exports 1854 1854 1525 1525 0 1400
Human Dom.
Consumption
735 735 685 685 0 645
Other Use, Losses 0 0 0 0 0 0
Total Dom.
Consumption
735 735 685 685 0 645
Ending Stocks 26 26 12 32 0 3
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Total Distribution 2615 2615 2222 2242 0 2048
(1000 HEAD) ,(1000 MT CWE)
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SWINE AND PORK
Post expects the size of the Australian pig crop to be stable at 5.25 million in 2017, the same as
the official estimate for 2016. Post expects pig slaughter to be 5.1 million head, the same as the
official estimate for 2016. In 2017, Post expects pork production to be unchanged compared to the
previous year, at 385,000 MT.
Currently, the pork processing sector reportedly consists of 45 abattoirs, of which the largest seven
accounts for over 80 percent of pigs processed in Australia. Larger pig farms in Australia have
tended to expand capacity due to higher prices for beef and a switch to other meats including pork.
At the same time, smaller pig producers have been leaving the industry.
Larger pig farms tend to be vertically integrated, w also contracting out pig production in order to
specialize in processing activities. The impact of this change is likely to be to increase the efficiency
of the industry, especially as pig farms become larger in scale. In late 2014 JBS acquired the
largest domestic producer of ham, bacon and other processed pork products for US$1.25 billion.
Overall, there are around 1,500 pork farmers in Australia which are focused on the fresh pork
market. This faces less competition from imports than frozen meat because of biosecurity barriers
on the importation of fresh pork from the United States and other countries. Post has actively
sought a review of these barriers.
Chart 5: Pigs slaughtered, Australia, March quarter 2000 to June quarter 2016 (‘000)
Source: Australian Bureau of Statistics (2016).
The competitiveness of the Australian pork industry is affected by the cost of feed grain which has
been significantly lower over 2016 than in recent years. The feed component in use currently
consists mainly of wheat, barley and sorghum which account for 60 percent of the total cost of
producing pork in Australia. The improvement in seasonal conditions across Australia from 2016 is
expected to increase profitability within the industry.
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Consumption
Australians consume around 25 kilograms of pork per person annually, made up of ten kilograms of
fresh pork and 15 kilograms of processed ham products such as bacon and small goods, which are
typically frozen. Pork products account for around ten percent of total fresh meat retail
consumption. Fresh pork sold in Australia is domestically produced while around two thirds of
processed pork products (ham, bacon and small goods products) are made from frozen boneless
pork imported from Denmark, Canada and the United States.
Consumption of pork has benefitted from higher beef prices in recent years. The domestic pork
industry has heavily promoted pork consumption through marketing campaigns such as ‘bacon
week’and the ‘get some pork on your fork’. Consumption generally peaks during Christmas but is
stable over the rest of the year.
Trade
Post expects exports of pork products in 2017 to be stable at 40,000 MT. Australia exports pork to
a range of countries including Singapore, Japan and New Zealand. Around half of these exports are
made on an intra-company basis; from subsidiary to parent company. The largest Australian pig
farm exports around one third of its production, mainly to Singapore and Japan. Pork imports into
Australia in 2017 are forecast to be stable at 240,000 MT, the same as the official forecast.
The Australian market is not currently open to direct imports of fresh, chilled or bone-in pork
products on biosecurity grounds. Over 70 percent of ham, bacon and other processed pork
products consumed in Australia are made from imported frozen pork which is heat-treated in
government accredited facilities and used to make ham and bacon products. Post has actively
sought a review of Australian biosecurity barriers on pork which currently prevent the importation
of U.S. fresh, chilled and bone-in pork products.
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Production, Supply and Distribution Statistics:
Animal Numbers, Swine
2015 2016 2017
Market Begin Year
Jan 2015 Jan 2016 Jan 2017
Australia USDA
Official
New
Post
USDA
Official
New
Post
USDA
Official
New
Post
Total Beginning
Stocks
2271 2271 2164 2164 0 2314
Sow Beginning
Stocks
255 255 265 265 0 270
Production (Pig
Crop)
4850 4850 5250 5250 0 5250
Total Imports 0 0 0 0 0 0
Total Supply 7121 7121 7414 7414 0 7564
Total Exports 0 0 0 0 0 0
Sow Slaughter 0 0 0 0 0 0
Other Slaughter 4957 4957 5100 5100 0 5100
Total Slaughter 4957 4957 5100 5100 0 5100
Loss 0 0 0 0 0 0
Ending
Inventories
2164 2164 2314 2314 0 2464
Total Distribution 7121 7121 7414 7414 0 7564
(1000 HEAD)
Meat, Swine 2015 2016 2017
Market Begin Year
Jan 2015 Jan 2016 Jan 2017
Australia USDA
Official
New
Post
USDA
Official
New
Post
USDA
Official
New
Post
Slaughter
(Reference)
4957 4957 5100 5100 0 5100
Beginning Stocks 25 25 21 21 0 26
Production 374 374 385 385 0 385
Total Imports 220 220 240 240 0 240
Total Supply 619 619 646 646 0 651
Total Exports 36 36 40 40 0 40
Human Dom.
Consumption
562 562 580 580 0 590
Other Use, Losses 0 0 0 0 0 0
Total Dom.
Consumption
562 562 580 580 0 590
Ending Stocks 21 21 26 26 0 21
Total Distribution 619 619 646 646 0 651
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(1000 HEAD) ,(1000 MT CWE)